Energy Capital Investment Symposium, June 3, 2009
Elk-4 flared 6 May 2008
Antelope-1 March 2, 2009 – Flowed 385 MMcfd, 5,000 BCPD Proposed LNG Plant, Port Moresby, PNG
Presented by Wayne Andrews - V.P. Capital Markets
1
Cautionary & Forward Looking Statements
This presentation includes “forward-looking statements” as defined in United States federal and Canadian securities laws. All statements, other than statements of historical facts, included in this presentation that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. In particular, this presentation contains forward-looking statements pertaining to business plans and strategies, proposed development of a liquified natural gas processing facility, and exploration and development activities.These statements are based on certain assumptions made by the Company based on its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. No assurances can be given however, that these events will occur. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause our actual results to differ materially from those implied or expressed by the forwardlooking statements. Some of these factors include the inherent uncertainty of oil and gas exploration activities; the availability and cost of drilling rigs, oilfield equipment, and other oilfield exploration services; the Company’s ability to finance the development of its LNG facility; the Company’s ability to timely construct and commission the LNG facility; turmoil in the financial and capital markets; political, legal and economic risks in Papua New Guinea; landowner claims; weather conditions and unforeseen operating hazards; the impact of legislation regulating emissions of greenhouse gases; and the risk factors discussed in the Company’s filings with the Securities and Exchange Commission, including but not limited to those in the Company’s Annual Information Form in the year ended December 31, 2008 and the MD&A for the period ended December 31, 2008. Readers are cautioned that the foregoing list of factors that may affect future results is not exhaustive. The forward-looking statements contained in this presentation are made as of the date hereof and InterOil does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, except as required by applicable securities laws. The forward-looking statements contained herein are expressly qualified by this cautionary statement. We currently have no reserves as defined in Canadian National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities. The United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. The Company includes in this presentation information that the SEC's guidelines strictly prohibit the Company from including in filings with the SEC. Investors are urged to consider closely the disclosure in the Company’s Form 40-F, available from us at www.interoil.com or from the SEC at www.sec.com and Annual Information Form in the year ended December 31, 2008 on SEDAR at www.sedar.ca.
2
Cautionary & Forward Looking Statements
Contingent resources referred to in this presentation are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development. There is no certainty that it will be commercially viable to produce any portion of the resources. These resource estimates are not classified as reserves primarily due to lack of marketing infrastructure, further project application, facility and reservoir design work. There is no guarantee that all or any part of the estimated resources will be recovered. Although a final project has not yet been sanctioned, pre - Front End Engineering and Design (FEED) studies are ongoing for LNG and condensate stripping operations as options for monetization of the gas and condensate. The proposed LNG plant will consist of a 220 mile pipeline from the Elk/Antelope field to the plant which is to be located adjacent to the InterOil refinery near Port Moresby. An export terminal will also be constructed at the LNG plant. However, commerciality of any monetization project has not been implemented for the purposes of deriving the resource estimates. The accuracy of resource estimates are in part a function of the quality and quantity of the available data and of engineering and geological interpretation and judgment. Other factors in the classification as a resource include a requirement for more delineation wells, detailed design estimates and near term development plans. The size of the resource estimate could be positively impacted, potentially in a material amount, if additional delineation wells determined that the aerial extent, reservoir quality and/or the thickness of the reservoir is larger than what is currently estimated based on the interpretation of the seismic and well data. The size of the resource estimate could be negatively impacted, potentially in a material amount, if additional delineation wells determined that the aerial extent, reservoir quality and/or the thickness of the reservoir are less than what is currently estimated based on the interpretation of the seismic and well data. In relation to the tables above, the “low” estimate is considered to be a conservative estimate of the quantity that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the low estimate. If probabilistic methods are used, there should be at least a 90 percent probability (P90) that the quantities actually recovered will equal or exceed the low estimate. The “best” estimate is considered to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate. The “high” estimate is considered to be an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual remaining quantities recovered will exceed the high estimate. If probabilistic methods are used, there should be at least a 10 percent probability (P10) that the quantities actually recovered will equal or exceed the high estimate. Marketable gas estimates exclude CO2, shrinkage and gas used for fuel.
3
InterOil – Our History
InterOil was formed in 1997 - Vision to be an integrated oil and gas company with operations in Papua New Guinea • Exploration and Production • Refining • Distribution and Marketing LNG focus and potential future LNG supplier • Gas Supply – Best Case estimate of 3.8 Tcfe gross • Infrastructure – Site lease, Marine facilities • LNG - technology and contractor selected InterOil is listed on two exchanges: • US NYSE: IOC and Papua New Guinea (POMSOX) Market Capitalization of ~ US$1.4 Billion ($36.28 per share – June 2, 2009) • Securities Issued – 37.6 million shares outstanding • Directors and Management hold 18 percent Office locations: Port Moresby, PNG, Cairns, Australia, Houston, USA
4
Our Vision
Develop an integrated energy company in Papua New Guinea Capitalize on exploration success through early liquids monetization and sponsorship of proposed LNG plant Demonstrate corporate social responsibility Provide a quality working environment Add value to the communities in which InterOil operates Create shareholder value
5
Stable Gov’t – Competitive Fiscal Policy
Former Australian Territory – Independence 1975
• • • Strong relations with Australia - $350m annual aid Constitutional Monarchy Parliamentary Democracy, Member of Commonwealth
PAPUA NEW GUINEA
Positive Fiscal Policy S&P Issuer Credit Rating – Positive General Information
• • Capital – Port Moresby; Approximately 1,400 Islands Population – 6 million
Official Languages: English and Pidgin Main Religion – Christianity GDP US$6.3 billion 6
Business Segments through Value Chain
Strategically Located and Positioned for Growth
Exploration Portfolio 4.6 million acres
Midstream Portfolio - Refinery K36bpd capacity
Downstream Distribution – 65% Market Share
Proposed Midstream LNG Project 50% Interest
7
Downstream Distribution
Largest distributor of fuel products in PNG Acquired BP and Shell’s PNG distribution assets Owned and operated by InterOil: • Distribution depots • Seaboard terminals • Trucking system • Retail network
8
Midstream – Refining
36,000 bpd capacity oil refinery Excess capacity for in-country growth Supplies domestic market with balance available for export Refinery strategically located – Government leased land
9
Upstream - Exploration
Operate 4.0 million acre onshore exploration license Assets secured at a time when Papua New Guinea was overlooked and under-explored Significant new discovery in frontier basin, namely; • Elk/Antelope gas field • Highly productive carbonate reservoir trend • Resource estimates underpin single/two train LNG plant Outstanding achievement accomplished in a difficult operating environment in a short time span
10
Dominant Operated Acreage Position in a World Class Hydrocarbon Province
11 Potential Recoverable 25 Tcf
Potential Recoverable 11 Tcf
Source: Papua New Guinea Department of Petroleum & Energy
Seismic Confirms Multiple Structures
400+ Km Seismic Data Reduced risk Leading PNG carbonate knowledge Upgrade Gas Volume Estimates
12
Elk/Antelope Gas Field - View to West
2.23 miles
1.75 miles
0.9 miles
2.9 miles
k El u fa lt
Elk Block
Antelope Block
13
Improved Seismic Indicated Reef Development
Composite Line E4IOL05 and E12IOL07
11200 12000 12800 13600 14400 15200 16000 16800 17600 18400 19200 20000
E4IOL05
0
Elk-4
Antelope-1
Antelope-2
E12IOL07
0
-400
-400
-800
-800
Top Reef Limestone Surface
-1200 -1200
-1600
-1600
-2000
Projected GWC (TWT)
-2000
-2400
-2400
-2800
-2800
11200 0 0.25 0.5 0.75
12000 1
12800 1.25miles
13600
14400
15200
16000
16800
17600 0 500
18400 1000
19200 1500 2000
20000
2500m
1:40000
1:40000
14
Antelope-1 – Confirms Reef Development
Antelope-1 encountered the limestone reservoir 1,595 feet higher than the Elk-4 well. Gas flowed to surface at 15 MMcfd during underbalanced drilling Mud logs indicate almost 100% dolomitization of the limestone at the top of the structure enhancing porosity and permeability and confirms reef development Mud losses to formation dictated transition to pressure management drilling system utilizing tandem down hole deployment valves custom designed for Antelope-1
15
Antelope-1 World Class Discovery
Antelope DST#1 and the well log confirm one of the largest hydrocarbon column heights encountered in a single vertical onshore wellbore in all of Asia at over 2,300 feet FMI log interpretation and core analysis identify reef facies limestone is present throughout the entire reservoir section Log results indicate gross/net reservoir exceeds 88% or 2,277 feet of net pay above porosity cutoff with porosity averaging 8.4% across entire reservoir section Visual inspection of the 188 sidewall cores demonstrate good porosity and permeability throughout the entire 2,600 feet of reservoir section with some intervals exceeding 20%
16
Antelope-1, Elk-1 and Elk-4 Correlation
Antelope-1 Elk-1 Elk-4
102 MMcfd & 5Bbls/MMcf
105 MMcfd & 18Bbls/MMcf
100m Antelope-1 Vs 100m Elk-1
Antelope-1 1750m-1850m Elk-1 1725m-1825m
17
Dolomite Cap at Antelope-1
Antelope-1 Antelope-1 1745m-1900 Core sample at 1799.5m
Core sample at 1851m
18
Antelope-1 Flow Rate Comparison
Well Gross Reservoir 620 Ft. 600 Ft. 2,600 Ft. Net Percent Reservoir Pay 88 Ft 166 Ft. 2,277 Ft. 14% 28% 88% Production Flow Test Tubing OD Natural Gas Condensate 5.5 inch 102 MMcfd 510 BCPD 4.5 inch 105 MMcfd 1,890 BCPD 7.0 inch 382 MMcfd 5,000 BCPD
Elk-1 Elk-4 Antelope-1
Antelope-1 well flowed at 382 million cubic feet of natural gas per day (MMcfd) with 5,000 barrels of condensate per day (BCPD) for a total 68,700 barrels of oil equivalent per day (BOEPD), setting a new record rate for the country of Papua New Guinea The flow test recorded a maximum calculated rate at 545 MMcfd for a dry gas reading through a 6 inch capacity choke that was opened to 3 ½ inches or about 30% of capacity
19
Top Tier Oil Field Services In PNG
20
Antelope-1 Flow Test - March 2, 2009
21
Antelope-1 Flow Test - March 2, 2009
22
Antelope-1 Flow Test - March 2, 2009
Phil Mulacek InterOil CEO with Prime Minister of PNG Sir Michael Somare
23
Government Project Support
Papua New Guinea Post-Courier March 3, 2009
“…it is now our turn to commit to clearing the path toward first production with our loyal and dependable partner, InterOil.” Prime Minister Sir Michael Somare
The National, March 6, 2009
“InterOil has more than satisfied its commitment to maintain and extend its licence through investment in seismic data acquisition and drilling of wells over six years, which ultimately resulted in the largest discovery in the country’s history and the world’s largest vertical section of reef at 792m,” Petroleum and Energy Minister William Duma “The flaring of Antelope One last Monday underpinned a first train 3.5 million tonnes per annum capacity plant at an estimated cost of US$5 billion.” Joshua Kalinoe, Petromin’s managing director and chief executive
24
Third Party Resource Estimate Elk/Antelope Structure
Gross Resource Estimate for Gas and Condensate As At December, 31, 2008 Contingent Gas Resources (Tcf) Contingent Condensate Resources (MMBbls) Contingent Resources MMBOE Low 2.32 36.7 423.4 Case Best 3.43 59.3 631.0 High 4.73 87.9 876.2
Resource Estimate for Gas and Condensate – Net to InterOil* As At December, 31, 2008 Contingent Gas Resources (Tcf) Contingent Condensate Resources (MMBbls) Contingent Resources MMBOE Low 1.3 20.4 235.7 Case Best 1.9 33.0 351.3 High 2.6 48.9 487.8
An evaluation of the potential resources of gas and condensate for the Elk/Antelope field has been completed by GLJ Petroleum Consultants Ltd., an independent qualified reserves evaluator, as of December 31, 2008 The estimates presented are in accordance with the definitions and guidelines in the COGE Handbook and Canadian NI 51101 Best Case estimate of 3.8 Tcfe gross (2.1 Tcfe net) and High Case estimate of 5.3 Tcfe gross (2.9 Tcfe net).
*55.67% Participating Interest assumes all IPWI Investors and the PNG Government elect to fully participate after a Production Development License has been granted.
Please refer to the statement of resources in the Company’s 2008 Annual Information Form filed on www.sedar.com for additional disclosure.
Contingent resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development. There is no certainty that it will be commercially viable to produce any portion of the resources. These resource estimates are not classified as reserves primarily due to lack of marketing infrastructure, further project application, facility and reservoir design work. There is no guarantee that all or any part of the estimated resources will be recovered. Although a final project has not yet been sanctioned, pre - Front End Engineering and Design (FEED) studies are ongoing for LNG and condensate stripping operations as options for monetization of the gas and condensate.
25
Papua New Guinea Fields
PNG ‐ Natural Gas, NGL & Oil Resource
Total MMboe HIDES ELK/ANTELOPE JUHA KUTUBU P'NYANG ANGORE BARIKEWA MORAN AGOGO SE GOBE GOBE MAIN KIMU ELAVALA SE HEDINIA KETU STANLEY Total 934 631 360 292 240 218 181 159 85 76 61 54 48 31 16 9 3,395 2P/C Gas BCF 4,176 3,430 1,350 1,060 1,280 1,200 1,000 425 383 268 208 300 200 157 70 44 15,551 NGL MMboe 176 59 115 71 8 ‐ ‐ 20 16 10 16 ‐ 12 3 3 1 510 Oil MMbbl ‐ ‐ ‐ 29 ‐ ‐ ‐ 62 ‐ 17 7 ‐ ‐ ‐ ‐ ‐ 115
Billion Barrel Potential
InterOil’s Elk/Antelope discovery ranks in size as one of the largest fields in the country At this early stage of appraisal, and utilizing data as at December 31, 2008, high-end (C3) estimates at 876 MMboe gross (487.8 MMboe net) have significant upside potential The Elk/Antelope discovery has served to de-risk the InterOil’s extensive surrounding prospect inventory
26
Source: Papua New Guinea Department of Petroleum & Energy
No Contribution From Lower Zones Schlumberger PLT Log
PLT log indicates almost 50% of the flow is coming from above 1,780 meters and 100% is produced from 1,850 meters and above, representing less than 12% of reservoir Production logs confirm that flow tests were unable to draw down the reservoir enough to extract any hydrocarbons below 1,850 meters At 80 MMcfd the drawdown in the reservoir was only 4psi The extreme permeability at the top did not allow the lower section of the reservoir to contribute to the flow test.
27
E&P Forward Plan – Antelope-1 ST Targeting Liquid Hydrocarbons
Antelope-1
• Collect remaining pressure, flow & down hole gauge data • Sidetrack well to test lower zones of interest • Complete for production
Antelope-2
• Location construction nearly completed • Targeting spud following rig move from Antelope-1 • Drilling program designed to test for oil and condensate
Expand Seismic Coverage
• Infield seismic at Elk/Antelope • Further delineation of surrounding prospect inventory • Identify most likely oil targets
Accelerate Exploration Prospect Inventory
• Mule Deer • White Tail Wolverine Raptor
28
Antelope-1 Sidetrack
Sidetrack designed to test zones of interest in lower section of reservoir Plan to drill and test each zone of interest on the way down with single packer Lowest mechanical risk test, important for liquid stripping operations
Original Hole
d Si
GAS
Higher CGR
Antelope-1ST Crude Oil Sample
c ra et
Possible Light Oil
k
Water
29
Antelope-1 Sidetrack DSTs
Multiple DSTs planned on identified zones of interest Expect higher liquid content with depth DST #8 ST1- 2,380 to 2,416 meters. Recovered oil and oil emulsion. DST #12 ST2 – 2,347 to 2,402 meters. Recovered gas, condensate and oil. DST#13 ST2 – 2,375 to 2,402 meters. Recovered oil and very little gas. The oil measured 35 degree API gravity in the field. The forward plan is to drill an additional 148 feet (45 meters) then perform another DST.
InterOil does not have any reserves and the company has not yet been able to determine any reasonable approximation of oil volumes, and in particular whether oil volumes would be sufficient to be commercially exploitable.
30
Antelope-2 Preparing For Drilling
31
Proposed LNG Project Strategy
Deliver a fast track LNG project in PNG Create Value for PNG and the Project Investors: • Early monetization of InterOil’s Elk/Antelope gas discovery • Liquid gas (LPG) gathering opportunity and condensate stripping • Capture share of Asia and US markets during period of increasing LNG demand • Pioneer future gas processing industry in PNG creating wealth and employment in both the upstream and downstream industries InterOil now intends to enter direct negotiations with industry partners on an ownership stake in the Elk/Antelope structure, an ownership stake in the proposed LNG plant and long-term LNG off take contracts
32
PNG at Heart of Largest LNG Market
Source: BP Statistical Review 2008
33
Proposed LNG Project Location/Scope
Compressor Station 6 - 9 MMtpa LNG Plant + LPG export
Kopi
Elk
Napa Napa Pipeline Refinery 220 miles
Napa Napa Jetty Upgrade
Project Investment US$5 - 7 billion
34
Attractive LNG Economics
Superior Quality Supply
• • • • • High deliverability, low cost, onshore supply. Rich in condensate and LPG Low in contaminates (CO2, H2S) Protected geographic region Near coast
Focus Economics estimates that by 2020, the LNG project may contribute 15-20% of PNG’s annual GDP At its peak of production, the LNG project could contribute US$1.2 billion directly to PNG’s annual GDP A total of US$25 – $40 billion expected in direct in-country benefits
35
Developing World Scale LNG
InterOil refinery
Located on InterOil leasehold land adjoining Port Moresby harbor
36
The Whole Value Chain
Elk
Raptor
Duck Bill
Antelope
Na
tu ra l
Ga s
Sa
le
LNG Plant
Condensate/ LPG Domestic LPG Marketing Export
Marketing and Shipping
Commercial Boundary
37
March 31, 2009 Financial Highlights
For the March 31, 2009 quarter, InterOil reported net income of $2.6 million ($0.07 per share), a $5.0 million improvement over the equivalent quarter in the prior year. EBITDA* for the quarter ended March 31 2009 totaled $10.9 million, an improvement over 2008 first quarter EBITDA of $7.1 million Cash inflows from operations for the first quarter of 2009 were $18.6 million, compared with $10.1 million for first quarter of 2008 • As at March 31, 2009, InterOil held cash, cash equivalents and restricted cash of $60.0 million, of which $17.4 million was restricted Debt-To-Capital Ratio (Long term Debt/(Shareholders’ equity + Long term Debt) was reduced to 34% at March 31, 2009, substantially down from 68% at the same time in 2008.
*Earnings before interest, taxes, depreciation and amortization is a non-GAAP measure and is reconciled to GAAP in the MD&A for year end 2008 filed on SEDAR and our website www.InterOil.com.
38
Financial Summary - Quarterly Results for Past Eight Quarters*
(1) Earnings before interest, taxes, depreciation and amortization is a non-GAAP measure and is reconciled to GAAP in the MD&A for year end 2008 filed on SEDAR and our website www.InterOil.com.
39
Improved Balance Sheet*
March 31, 2009
Cash, Cash Equivalents, Restricted Cash Total Current Assets Plant & Equipment, Oil & Gas Properties Total Assets Current Portion of Secured Loan Current Liabilities Secured Loan 8% Convertible Subordinated Debenture Total Liabilities Shareholders Equity $60.0 $178.5 $365.7 $553.0 $9.0 $117.3 $52.4 $65.8 $321.9 $231.1 $441.7 $96.1
Dec 31, 2007
$65.9 $216.8 $317.7 $537.8 $136.8 $266.7 $61.1
May 22nd, 2009 InterOil announced conversion of all 8% convertible subordinated debentures. After the conversion has taken place effective on June 8, the Company’s long-term debt to total capitalization ratio is expected to be reduced to 17% on a pro forma basis, down from 34% as at March 31, 2009, and from 68% as of March 31, 2008.
* Incomplete and abbreviated balance sheet, Investors are urged to consult the disclosure in the Company’s Form 40-F, Annual Information Form, and MD&A discussion available from us at www.interoil.com or from the SEC at www.sec.gov or on SEDAR at www.sedar.com.
40
In Summary
Papua New Guinea is a world class under-discovered frontier Proving significant hydrocarbon resource
• • • • GLJ Petroleum Consultants Ltd. certified resources of 3.8Tcfe gross best case. High productivity wells, low cost structure 1st, 2nd and 3rd highest recorded gas flow tests in Papua New Guinea Oil sample recovered, evaluation in progress
Outstanding achievement accomplished in a difficult operating environment in a short time span World class assets strategically located in a hydrocarbon hub on the doorstep of Asia InterOil has a significant exploration and appraisal portfolio Participating in the full value chain generates major advantages The achievement of our goals will leverage the company for exponential growth Thank you
41